Repossessions jumped in 2009, but per-vehicle loss dropped

High unemployment and an uptick in auto loan delinquencies forced increased vehicle repossessions last year .

But the growth rate of repossessions slowed as auto lenders applied tougher credit standards to new loans. And while repos are up, the severity of per-unit losses associated with repos declined in 2009 vs. 2008.

That's because used-car values recovered, said Ford Credit in its 2009 annual report filed last month with the Securities and Exchange Commission. GMAC Financial Services reported a similar experience for 2009 vs. 2008.

The positive trend in used-car pricing has continued into 2010, according to auction firm ADESA Inc. In February, the latest available month, the average wholesale used-vehicle price was $10,138, an increase of 8.3 percent from the year-ago month, said Tom Kontos, executive vice president for customer strategies and analytics.

A bad vintage

Much of the trouble with repossessions and delinquencies stems from loans that were made when credit standards were looser, says Melinda Zabritski, director of automotive credit at Experian Automotive.

"The 2006-2007 vintage, those are some of the worst performing loans out there," she said in a March 9 conference call with reporters and analysts.

If a vehicle gets repossessed, the losses add up fast. GMAC said its average per-unit loss on repossessions for the fourth quarter of 2009 was $9,635 on new cars. Still, that was down from a staggering $12,747 in the fourth quarter of 2008, a 32 percent improvement.

Repossessions accounted for about 3.7 percent of GMAC's outstanding loans in the fourth quarter, up from about 3.2 percent the previous fourth quarter. For all of 2009, repos averaged about 3.5 percent, up from 2.7 percent for 2008, GMAC said.

At Ford Credit, the growth in repossessions leveled off in the fourth quarter at about 3.2 percent of its outstanding loans, roughly even with the third quarter of 2009.

High but leveling off

For the full year, repossessions increased to an average of 3 percent of Ford Credit's portfolio, up from 2.3 percent in 2008 and about 1.9 percent in 2007. The previous peak for repossessions at Ford Credit for a full year was about 3.3 percent in 2003.

Losses per repossession for Ford Credit averaged $10,700 in the fourth quarter of 2008. That fell to an average of $7,700 in the fourth quarter of 2009. For the full year, the loss per repossession was an average of $8,300 in 2009, down from $9,900 in 2008.

Said Ford Credit: "Severity was lower by $1,600 per unit from a year ago, mainly due to improvements in auction values in the used-vehicle market."